The stock market is poised for a turbulent opening tomorrow following the announcement that President Joe Biden will not seek reelection. This development is expected to introduce significant volatility as the political landscape shifts.
As Democrats rally behind a new candidate—most notably Vice President Kamala Harris, who has received Biden’s endorsement—the economic implications of this decision are becoming apparent.
Josh Thompson, CEO of Impact Health USA, remarked over the weekend that should Biden withdraw from the race, it would likely lead to market instability. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he stated.
In response to this uncertainty, investors may gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less sensitive to political and economic fluctuations.
Another potential outcome of Biden’s exit could be a slowdown of the so-called “Trump Trade.” This term describes the market behavior linked to the anticipated effects of a potential second term for former President Donald Trump. Since outperforming Biden in debates and surviving an assassination attempt, Trump’s influence on the market has been palpable. His previous presidency was characterized by favorable policies for business, particularly in sectors like healthcare, banking, cryptocurrency, and oil, alongside notable companies such as Tesla and Trump Media and Technology Group.
Despite the potential for a pause in the recent momentum of the Trump Trade, Raymond James analyst Ed Mills suggested that the electoral odds would remain unchanged at 60% for Trump versus 40% for Biden or another Democratic candidate. “We could see a stalling out of the recent ‘Trump trade’ as the market reassesses the race, but we do not see a broader market reaction,” Mills noted in a recent communication shared with CNBC.